Could mobile internet be the death of talking on the phone?

Mobile operators are making enough money from people surfing the web on their
mobiles to offset the decreasing revenue from voice calls. So is it no
longer good to talk?

Smartphones have helped to boost revenues from data downloads, but pose a long-term risk as users start to use Facebook and Twitter instead of calls and texts.Photo: Alamy

By Katherine Rushton, Telecoms, technology and media correspondent

4:43PM BST 20 Jun 2011

Termination rates for calls may be being pushed lower, but the telecoms industry has got a new revenue stream to help it grow – and one that seems likely to accelerate as mobile downloads get faster and more consumers exchange their traditional handsets for smartphones.

However, the increase in smartphones also heralds a new pattern of consumer behaviour that puts telcos in a vulnerable position.

The more time people spend using the web on the move, the more likely they are to ditch traditional calls in favour of voice-over-IP services like Skype, or take to social networks like Facebook and Twitter to send their friends the equivalent of a text. The problem with these alternatives for telcos? They are all low-cost or free.

For the moment at least, the clichés are true: the people doing this tend to be younger, city-dwelling early-adopters of tech trends. But it is not going to stay that way.

If businesses can significantly reduce their overheads by replacing their phone bills with reliable Skype access, they will do so. And as smartphones replace traditional mobiles as the handset of choice, a much broader demographic of consumer will be joining in too.

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Of course, mobile phone operators can continue to charge for downloading the websites in the first place, but they need to do a great deal more to compensate for a wholesale shift away from voice calls.

So-called ‘all you can eat’ services, where consumers get unlimited downloads in exchange for a fixed monthly fee, have helped players such as Three to gain market share, but they are hardly sustainable as a long term business model.

Telcos need to re-educate users that have enjoyed low-cost fixed-fee access to as much web browsing as they like, so that they expect to pay for downloads. That is no mean feat - but the alternative is for telcos to stand by and hand over their revenues to a new generation of communications companies.

It feels like the move away from fixed-line operators to mobiles all over again, and has the same potential to shake up an established market. Maybe the telcos need to join their former rivals in reminding the public that it is still good to talk.